Sunday, 25 October 2015

Some stories we should be thinking about

A few finance and related stories we need to be thinking about before Monday morning:

Macro matters:

Ben Bernanke has come under lots of criticism in the last few years but in this Lunch with the FT piece I think he actually talks some sense about risk:

Of course what is very apparent (further emphasised this week especially in Europe) is the compression of bond yields as additional stimulus occurs, very strikingly for shorter-term European bonds...

...and the UK government gets to raise longer-term monies at lower and lower yields

Meanwhile the speculative net positioning in Treasuries remains strikingly short...

As shown by this chart the value is with equity yield based on the last generation or so. 
On a not dis-similar theme I liked this from @awealthofcs on mixing in equities even into a bond heavy portfolio:

Striking brand value evolution from India

(h/t @CurtisSChin)

However it has been a difficult time for the emerging markets.  I personally think the next year or two will be noticeably better but this chart highlights such a view is still contrarian: 


Inevitably the above has been followed by big inflows in developed market equities:

(h/t @eurofaultlines)

Well if global warming does happen then the extreme part of the Northern Hemisphere is going to do rather better GDP-wise as per this projection...
(h/t @MarketWatch)

Wonderful on global geopolitical poker

Talking about China, 'China has never said the economy must grow seven percent this year, Premier Li Keqiang said in comments reported by the government ahead of a key meeting this week that will set economic and social targets for the next five years' (link here).  Hmm, sounds a bit like the classic 'broadly inline with market consensus line'.

Meanwhile I liked these observations on Chinese financial matters from @simonting:

People's Daily has just listed out 10 goals in 5-yr Plenum. I don't see anything special !!

Mainland enters stage of negative interest rate  ?
<blue> Deposit rate - CPI
<yellow> $SSEC

Bit of panic rising in Europe about the ongoing Greek reform initiatives (link here):

'The European commissioner for the euro told Athens it has "no time to lose" in carrying out reforms its international creditors have demanded in exchange for bailout funds'

Why is this?  Well as this article indicates: 'Meanwhile, state coffers are running low. This comes as the draft budget for 2016 indicates that authorities are hardly cutting spending, relying almost entirely on tax increases to achieve budget targets. The draft points to only 214 million euros in cuts to primary expenditure while aiming to raise more than 2 billion euros from value-added tax increases alone'

Meanwhile Portugal and the continuing aftermath of its elections (e.g. 'Eurozone crosses Rubicon as Portugal's anti-euro Left banned from power. Constitutional crisis looms after anti-austerity Left is denied parliamentary prerogative to form a majority government' - link here) continues to be a slow-burning story with real implications/importance. Much more on this during the next week no doubt.  Note today's big protests in Lisbon: 

Has been a very strong global stock market in the last week or two - aided by additional European stimulus and a Chinese interest rate cut.  As @RyanDetrick noted we are coming up to a number of the historically best days of the year for the S&P500.  

I liked this: 'The Boss', 'The Castaway' etc.: 'The Right Management Style for Your 401(k)' (link here)

Company-related observations:

We are right at the peak of the earnings season currently so this was an interesting read: '8 reasons why earnings don't matter' (my view is this is not the case but I take the point that good/bad earnings are not necessarily correlated with good/bad share price reactions).

Sector-wise domestic / dividend heavy still out-pointing the more global/cyclical on beats/misses:

Punchy on Buffett:

(h/t @LukeJohnsonRCP)

Someone sees value in US oil:

'Xinchao Shiye, a public company based in east China's Shandong Province plans to buy oil fields in the United States in a transaction worth 8.3 billion yuan (around 1.3 billion U.S. dollars)'.

Japanese corporate voting realities: 

(h/t @modestproposal1)

VWGate still continues to inspire plenty of amusing cartoons: 
Excellent Dogs of the Dow and related update (link here) from @HORANCapitalAdv

Some good news from my favourite gold equity stock: 'Randgold Resources’ Tongon gold mine has paid off its shareholders’ loans of $448 million, used to partially fund its capital investment of $580 million, thereby moving it into a dividend-paying position, chief executive Mark Bristow announced here today'.

A few stories from the Sunday Times and weekend online edition of The Financial Times:

'Aberdeen Asset Management has begun to sound out potential buyers for the group as Europe’s second-largest fund house struggles to put an end to a slump in its profitability, share price and assets under management'.

'Leading fund manager Neil Woodford is pushing for drugs giant GlaxoSmithKline to be split...separate its HIV business and its consumer healthcare division from the main medicines and vaccines arm' 

'Renault and Nissan bosses are set for crisis talks as French government activism threatens to unravel the car makers' 16 year alliance' 

'VW pressed to sell Porsche after debacle...they could list 40% of Porsche and maintain control...with Ferrari we now have a brilliant case study of arguably how easily it can be achieved' 

'RBS looks set to plunge into the red after booking hefty charges for its role in recent scandals' 

And finally...

Education: just how much of a sacrifice will parents make?

Have a good week

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